Countries/Jurisdictions of Primary Concern - Ukraine
Although Ukraine is not a regional banking or financial center, it has had close ties with European banking networks. Over recent years, however, several international banks have pulled out of the country. In Ukraine, significant vulnerabilities to money laundering have been identified in foreign economic activities, credit and finance, the fuel and energy industry, and the metal and mineral resources markets. Illicit proceeds are primarily generated through corruption; fictitious entrepreneurship and fraud; trafficking in drugs, arms, or persons; organized crime; prostitution; cybercrime; and tax evasion.
The large shadow economy represents a significant vulnerability. An additional facilitating factor is the level of corruption throughout society, both in the private and public sectors. In the course of investigations conducted in the first ten months of 2014, the financial intelligence unit revealed large-scale corruption activities of the Yanukovych government that could have cost the government the equivalent of $10.85 billion. The high level of corruption in the financial sector allows banking regulations to be bypassed or ignored.
Transnational organized crime syndicates are also present and both transit the country and conduct business in Ukraine. They are involved in drug trafficking, economic crimes, cigarette smuggling, trafficking in persons, public corruption, real estate and other frauds, violent crimes, and extortion. They are able to operate in Ukraine due to the corruption of the justice system.
Money launderers use various methodologies including real estate, insurance, bulk cash smuggling, financial institutions, and shell companies. According to Ukraine’s State Tax Administration, there continues to be growth in formation of offshore companies. Few Ukrainian businesses are owned transparently. The British Virgin Islands has been a popular offshore destination for those who wish to obscure ownership and to avoid taxes.
There is a significant market for smuggled goods and a large informal financial sector in Ukraine. These activities are linked to evasion of taxes and customs duties. Many Ukrainians work out of the country; worker remittances using banking transfers or via international payment systems amounted to approximately $4.8 billion in the first eleven months of 2014. However, not all worker remittances come through banking channels. The State Financial Monitoring Service acknowledges the existence and use of alternative remittance systems in Ukraine.
For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: //2009-2017.state.gov/j/ct/rls/crt/
Do FINANCIAL INSTITUTIONs engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or illegal drug sales that otherwise significantly affect the U.S.: NO
criminalizATION OF money laundering:
“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes
Are legal persons covered: criminally: YES civilly: YES
Know-your-customer (KYC) rules:
Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES
KYC covered entities: Banks, insurance companies, gaming institutions, credit unions, depositories, securities traders, registers, pawn shops, mail service operators and other operators conducting money transfers or foreign exchange, real estate traders, certain traders of precious metals and stones, notaries, auditors, independent lawyers, leasing providers, and private entrepreneurs
Number of STRs received and time frame: Not available
Number of CTRs received and time frame: Not available
STR covered entities: Banks, insurance companies, gaming institutions, credit unions, depositories, securities traders, registers, pawn shops, mail service operators and other operators conducting money transfers or foreign exchange, real estate traders, certain traders of precious metals and stones, notaries, auditors, independent lawyers, leasing providers, and private entrepreneurs
money laundering criminal Prosecutions/convictions:
Prosecutions: 241 in 2014
Convictions: 156 in 2014
Records exchange mechanism:
With U.S.: MLAT: YES Other mechanism: YES
With other governments/jurisdictions: YES
Ukraine is a member of the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), a FATF-style regional body. Its most recent mutual evaluation can be found at: http://www.coe.int/t/dghl/monitoring/moneyval/Countries/Ukraine_en.asp
Enforcement and implementation issues and comments:
The Government of Ukraine has made some recent progress in strengthening its AML/CFT regime, in particular in enhancing due diligence requirements for domestic politically exposed persons (PEPs) and introducing criminal liability (i.e., criminal fines) for corporations. The law introducing criminal liability for legal persons for money laundering crimes was passed on May 3, 2013 and enacted on April 27, 2014. A law enhancing due diligence for domestic PEPs was passed on October 14, 2014 and enacted on November 25, 2014.
Ukraine combines currency transaction reports (CTRs) and suspicious transaction reports (STRs) for statistical purposes. From January to September 2014, 849,907 reports were received.
Ukraine should address the rise of cybercrime and related transnational organized crime activities by examining the significant amounts of U.S. currency which appear to be diverted into this region using financial institutions. Ukraine should increase prosecution of large-scale financial crimes, corruption, and money laundering schemes. It also should improve implementation of its provisions for asset freezing, confiscation, and forfeiture. Ukraine should enhance regulatory oversight of its gaming industry and examine how gaming is used to launder money and its possible relationship with regional organized crime. The government should investigate how informal money and value transfer networks are used not only for remittances, but for the transfer of illicit proceeds.
While Ukraine has signed and ratified international treaties, implementation is weak in many instances. This is particularly true in the area of international law enforcement cooperation, mutual legal assistance, and asset forfeiture. Ukraine should work aggressively to implement its treaty obligations.